Why is it a Bad Idea for a Buyer to Approach a Listing Broker Directly When Purchasing a Home
Copyright © 2014- 2019 AUTHOR: Paul R. Marino, REALTOR®, e-Pro®
This article is going to be an eye opener for many. It provides home buyers with information and insight that only someone on the inside with decades of experience can provide. The purpose of this article is to dispel the rumor that going directly to the listing broker is somehow going to get you a better deal on your next home purchase. With one exception (outlined below in the final paragraph), it's not. You're going to pay the exact same price for that home no matter how you (the buyer) approach a seller. Let me explain.
The vast majority of home sellers engage a traditional broker to sell their property. People are creatures of habit, and if your grandfather sold his house this way, and your father sold his house this way, and your brother sold his house this way, it must be "the way". And while hiring a traditional real estate broker will certainly get the job done, it's also a certainty that sellers will unnecessarily leave five figure money on the table, as our 2-minute video explains very clearly.
You should know, that in approximately 85% of all home listings taken in the United States, the type of listing signed by the home seller is the Exclusive Right To Sell, otherwise referred to as an Exclusive Listing Agreement. Why sellers do this is beyond me, since the home seller will pay the FULL commission (typically in the 5% to 7% range) to the listing broker, even if the seller themselves locates a buyer. Perhaps you don't need the $24,000 you'll be handing over on a typical $400,000 home sale. Does this make sense to you? Of course it doesn't. I've devoted an entire article explaining why it is a very bad idea to sign an Exclusive Right To Sell listing agreement.
Back to the topic at hand. Imagine you're a prospective home buyer, interested in cutting the best deal you can on a home. So maybe you're thinking: "I know...I'll go directly to the listing agent, negotiate with them directly, and I'll get a much better deal on the home because there's only one broker involved, not two." I hate to break it to you folks, but you're going to pay the exact same price for the home if you ring up the listing broker directly. Why is this so, you ask? Well, it all started with that pesky little thing the seller signed (the listing agreement), that compels the seller to hand over 5% to 7% when the home sells, no matter what, and no matter who finds the buyer.
Does anyone reading this article really believe the listing broker is going to say to the seller: "I really didn't mean what I said about that 5% to 7% payout you owe me. Let's just cut that number in half, since you're such nice folks." No...no they're not. Trust me when I tell you this. The listing broker is going to be sitting at the closing table with their hand out, expecting the FULL 5% to 7% payout. For one thing, most real estate agents, but not all, work for the managing broker, or principal broker of a firm. What that means is, any decision made relating to the waiving of any commission payout is not made by the individual agent, but by the managing broker or principal broker of the firm.
By approaching the listing broker directly, you will not save a dime. That home seller will pay out that same 5% to 7% on closing day whether one broker is involved, or two. If only the listing broker is involved, it simply means the seller pays the entire commission to the listing brokerage. And if two brokerages are involved, the same 5% to 7% commission will be split, but the TOTAL payout will be the same. Even more important for you, the buyer, is the fact you will be placing yourself at a serious disadvantage, since the listing broker works for the seller, and owes allegiance and loyalty exclusively to the seller. Which is why there is no downside of any kind when using a buyer broker, and, if using Landfall Properties, LLC as your buyer brokerage, actually pays you a four figure buyer rebate on closing day.
As I mentioned at the outset of this article, there is only one exception to going directly to the listing broker. And that one exception is using the Flat Fee MLS listing services of Landfall Properties, LLC. So right about now, you're saying....yeah...right. Want to know what happens when a buyer (not tied to a buyer broker) calls to see a Landfall Properties, LLC listing? The lead gets immediately routed to the seller for follow up. The seller will pay absolutely no listing side commission of any kind. And, if the buyer is smart, they'll bypass the use of a buyer broker altogether, and simply engage a real estate attorney to represent them. By doing so, everybody wins. The buyer will have professional representation by a licensed real estate attorney, the seller will not have to payout either a buyer broker or listing broker commission, and the buyer will likely cut a better deal on the property, since the seller is not burdened by a 5% to 7% commission payout.
